LEONARD, Jr. The Merchant Marines of the United Slates, England, France, and Japan 19004912 ju IX a, college ♦i * t ,t:u,iNois IiIH KAHY ; 2* 1 HI THE UNIVERSITY OF ILLINOIS LIBRARY mm W?4 m THE MERCHANT MARINES OF THE UNITED STATES, ENGLAND, FRANCE, AND JAPAN 1900-1912 BY FRANK BONNER LEONARD, JR. THESIS FOR THE DEGREE OF BACHELOR OF ARTS COLLEGE OF LITERATURE AND ARTS UNIVERSITY OF ILLINOIS 1912 \ UNIVERSITY OF ILLINOIS IS 19^ THIS IS TO CERTIFY THAT THE THESIS PREPARED UNDER MY SUPERVISION BY ENTITLED JAoozilLL IS APPROVED BY ME AS FULFILLING THIS PART OF THE REQUIREMENTS FOR THE DEGREE OF Ik Instructor in Charge APPROVED: HEAD OF DEPARTMENT OF Digitized by the Internet Archive in 2013 http://archive.org/details/merchantmarinesoOOIeon TABLE OF COITENTS Page IKTBODUCTIQH I. EARLY HISTORY ANL PRESENT CONDITIONS 1 II. NEED QP A MERCHANT MARINE (a) Relations to Foreign Shipping and Commerce .... Q (b) Relations to Navy and Army 12 (c) Relations to the General Economic Development of the Country 14 III. ENGLAND AND HER MERCHANT MARINE SINCE 1900 1 Q IV. FRANCE ANL EER MERCHANT MARINE 27 V. THE RISE OF JAPAN 37 VI. METHODS OF UPBUILDING OUR MERCHANT MARINE 44 VII. ECONOMIC SITUATION IN UNITED STATES, ENGLAND, FRANCE ANL JAPAN IN RELATION TO THE MERCHANT MARINE 55 UIDC MERCHANT MARINES OF UNITED STATES, EiJGLAND, FRAHCB AND JAPAN. INTRODUCTION The American traveller from the United States in Europe or in South America today is noted "because of his pride in his country and everything American, and it is often a grievous "blow to that pride to note, as he gazes on the forest of masts and the many flags that fly over the ships in the ports of these countries, the absence of the stars and stripes. And this is true not only of Europe, hut also of the great American ports of New York, Philadelphia or Boston. So strong has grown the feeling on this subject that "both houses of Congress have had since 1904 a merchant marine commis- sion investigating conditions and advising as to what may he done to rebuild our foreign merchant marine. It has been generally agreed that if this is done at once, government aid must be invoked, and in this connection that "ob- noxious" word "subsidy" is most often used. In order to make clear the meaning of some of the common terms that will crop up all through a discussion of this kind, it may be well to define a few of them. A subsidy is any form of government aid given to ship building or ship operating interests. A postal subvention is money paid to a ship company partly for services rendered in carrying the mails, partly for speed or other conditions, and partly as pure subsidy or aid. A naval or admiralty subvention is a sum of money paid by the government to ship owners in return for building and main- taining ships so as to make them available for war uses and giving the government a right to their services in time of war. Fisheries bounties are paid either on the number and ton- nage of boats built or on the poundage of fish caught. Shipbuilding or construction bounties are bounties paid to shipbuilding firms to encourage the construction of ships and the maintenance of adequate facilities for repair. A subsidy is never a payment for direct service rendered, but is always a gift from the government to stimulate trade or to aid in the national defense. It will be seen, though, that whether we call it subsidy, bounty or subvention, it is not a mere gift of money which is paid by the people of a nation out of the goodness of their hearts, but a sum of money expended with the expectation of gaining ultimately, benefits which outweigh the cost, often intangible benefits that cannot be computed in dollars and cents, such as pretige on the seas, stimulation of patriotism etc. With these definitions disposed of, we can pass to the main discussion of the problem before us in the United States. Then we will take up the history of the merchant marines in England, France and Japan, three nations who have tried some forms of subsidy with varying and differing success. Then we will try to compare the United States with these countries in the upbuild- ing of a merchant marine in view, and see what conclusions we can draw from their experience. 1 CHAPTER I. EARLY HISTORY AMD PRESENT CONDITIONS A country, lying along the shores of the ocean, with har- bor plentiful and secure, peopled "by a race that came original- ly from the bold Northmen and the hardy Saxon pirates, affords every inducement to the belief that its people will be a mari- time people. And in the early colonial, and later in the first period of our national life, the American people did not disappoint this belief. Almost from the beginning ships were built from the ample forests growing almost at the ocean's edge, the seams were stopped with pitch from the Carolinas and the sails were made by the diligent wives of the Hew Englanders. Whale fishing, smuggling, the slave trade and piracy were a few of the minor fields before the Revolution. Then came the daring exploits of John Paul Jones, and later the glorious victories of the War of 1812, achieved by a navy that was made after the models of merchant vessels. The rich harvest of the seas reaped amid the difficulties created by both of the contestants in the Napoleonic Wars are familiar to all. Until 1840 American ship builders were the best in the world and our sailing clippers held the speed records of the time. No seamen were so ef- ficient as ours, so that whiD e the wage paid American crews was far higher than the wage of European seamen, the cost of operating a vessel was much diminished by the fact that it required fewer hands to man a ship. ' But in 1840 came the steam engine and the first practicable attempts at steam navigation on the ocean. Steel commenced to supplant wood in the hulls of the ships. England saw the opportunity and specialized in the new kind of ships. The Yankee ship builders obstinately clung to their old wooden models, partly because they did not have iron and steel to adapt themselves to the new conditions. The hulls were con- structed with the greatest care and all the speed obtainable in a sailing vessel was surely attained by them. The fact that our tonnage increased against the adverse competition of the new type until in 1861 it stood at 2,496,894, the largest in the history of the country, is the most eloquent proof of the efficiency of our ship builders. But let us remember that this high mark was attained in the old type of ships and that these figures refer to foreign commerce, not our coastwise trade. The great Civil War left our magnificent merchant fleet a sad shadow of its former glory. The confederate cruisers like the "Alabama" had destroyed many of them. The shipyards had beer^L die so far as merchant vessel building was concerned, owing to the risk that this class of vessels assumed on the seas, and because they were kept busy in naval repairs to main- tain the blockade of the South, and partly because of lack of labor. Moreover the n country emerged from the war struggling be- neath the burden £t tremendous war debt and the knotty problems of reconstruction. While England was paying subsidies and aiding in every way her merchant marine, it seemed unwise to ask our government, staggering under an enormous debt to en- courage this branch of commerce. 3 Moreover the fertile prairies and vast almost unexplored wilds of the West really stood in greater need of government encouragement than our ships. Railways were needed sorely to bring golden grain to the eastern markets, and in the great surge westward to take freely of the treasures of a rich soil, attention was turned away from ship building. The merchant marine steadily declined until in 1898 the tonnage was only 726,215, and most of that was in sailing vessels. The Spanish War demanded that we buy some ships for colliers etc. , and at the close of the war these were, in many instances, con- verted and sold as merchantmen, so that in 1905, our tonnage had^rose to 954,513. The figures quoted so far refer to our foreign merchant marine. The progress of our coastwise and inland water marine has been steadily upward until in 1908 it stood at 4,055, 295^ We have traced briefly the rise and decline of the merchant marine, let us now consider some of the attempts to check the decline through government help. With the advent of steam and iron in ship building and with the ocean peace following the long sea battles of the Napolaneonic Wars, came the transition from private to public carriers. That is, instead of having private owned ships which sailed wherever they were chartered for, we find regular lines of ships plying between certain parts on a relatively fixed schedule. In 1840 the Cunard Line sent out the"Brittania" , a wooden paddle wheel steamer from Liverpool to Boston. They received $15,000 a voyage from the English government? The Inman Line, ten years 1. Spears American Merchant Marine 298. 2. Smith-Ocean Carrier 4 later followed the Cunard Line. In that year the first Amer- ican steam line, the Collins Line, was established. He re- ceived $850,000 a year in subsidies to meet the English sub- sidies, but an unparalleled series of unforeseen disasters destroyed the best ships of the line, and intimations of im- proper influence in Congress led to the abandonment of the sub- sidy in 18581 Other owners asked for subsidies, and when they tried to run steam lines without them they either failed or were com- pelled to merge with the European companies. The few American sailing packet lines held on for a while but steam competition had sealed their doom. The North German L.loyde, the White Star Line and other foreign lines operating under subsidies, used steam for propulsion. Meanwhile the chartered steam ship traffic was rising slow- ly. The fast Yankee clippers survived in the tramp steamer trade much longer than in the packet trade. But in this line, even when there was a regular demand for a certain commodity from a certain country, such as tea from China or bananas from the Bahamas, regular freight lines sprang up. In 1855, for the first time, the Yankee tea clipper was beaten to London by an English steam tramp. While foreign countries generally did not subsidize these steam tramps, the inability of our ship builders to utilize steel and iron would not let us fol- low their example until it was too late, when our sailers, efficient in handling halliards and spars, were at a disad- vantage in stoking furnaces, and when ship builders had wait- ed until they had to compete with a settled business of foreign 1. Smith- 126 2. i"bid 123 steamship builders. And so the numbor of ships declined with a rapidity that was only succeeded by our relative decline in the carrying trade of the world. A few feeble efforts in the way of reso- lutions were made in the form of subsidies between 1870 and 1890, but Congress turned an indifferent ear to such projects. But in 1891 the government again took cognizance of the fact that our foreign merchant marine was almost nothing. England, Germany and France were paying large mail subsidies to all their mail carrying lines. So a bill was drafted to give bounties to the general marine but failed on a vote in the House. Fin- ally on November 3, 1891 a postal aid law was passed which is in force today. It is the product of a close paring process of the House of Representatives and provides rather meagre protec- tion against larger foreign subsidies. 2 There are four classes of ships, based on tonnages of 8,000, 5,000, 2,000 and 1,000 and on speeds of 20, 16, 14 and 12 knots an hour. Only the fourth class can be wooden ships. But the subsidies were so small for the first two classes that that it did not pay to build vessels for them, and the Pacific Mail Line Company and the Red D Line with their third class ships were the only ones to avail themselves of it. The line to Brazil had to go out of business because of the severe competition encountered. In 1892, however, two British built ships of the Inman Line, owned by Americans, desired American registry and this was granted them on condition that two more vessels were ,1. Bates- American Havi£;ation-347 2. Marvin-American Merchant Marine 415-417 G built in this country. These four vessels are the only ones which have come under the first class of the postal aid law of 1891. Under this law, the officers must be American citizens, as well as a certain portion of the crew and must be available for war purposes. The reader will find the story of the aid rendered our navy in the Spanish War told most eloquently in Marvin's "American Merchant Marine." At the present time then, the. United States does have a system of subsidies to mail ships only, of a certain size and speed. It is generally conceded that these subsidies are too small to encourage much ship building in this country, especially as the high seas swarm today with foreign compet- itors. At the best the subsidy only aids line ships and not tramps. The further need of encouragement has been con- sidered in the attempted passage of the bill prepared by Senator Frye in 1905-06. It provides for aid to mailships under the present law, but with an increase of amount. In addition $5 a ton was to be paid for deep sea vessels of the tramp style. These bills will be criticized later. In 1908 the clause relating to freighting ships and bounties was omitted, but the increase in pay of mailships and the es- tablishment of more lines was provided for. Both of these bills failed of passage and today the merchant marine commis- sion is working on another. The original merchant marine commission of 1904 was composed of five senators and five repre- sentatives who took testimony in all the principal maritime towns from ship onwers, ship builders and miscellaneous nautical peo- ple. Their findings are embodied in a two volume report to the 7 House of Representatives. As we take a last look at the merchant marine from the purely historical side, we are struck with its brilliant rise and its sad decline. In the next chapter we will take up the question of the desirability of rebuilding and reestablish- ing something like our old time prestige on the seas. 8 CHAPTER II. MEED OF A MERCHANT MARINE Since 1900, the date which marks the advance of American manufactures into foreign markets, many reports from our consuls have drifted in showing the desirability of a merchant marine flying the American flag and establishing direct and regular con- nection between the United States and South America and the Orient. But it was in 1904-05, when Secretary of State Root made his tour through South America that the possibilities of a vast open- ing up of commerce to us were disclosed. From his extended and intelligent observation, Root indicated seven great basic matters whichAmericans must attend to, to secure a foothold in the mar- ket^nere. The seventh and most important is "It is absolute- ly essential that means of communication between the two countries should be improved and increased." 1 Germany, England, Norway, France, Japan, and other foreign countries have many vessels each year entering the ports of Rio Janeiro and Buenos Ayres, while in 1905, four little sailing vessels, two of them in distress, were the only American ships. 2 But it is not a mere sentimental difference of the flag. These foreign vessels belong to swift lines that ply regularly between their mother countries and South America. There is not a single regular line from New York to any port of South America, south of the Carribean Sea. 3 A number of slow, unreliable tramp steamers , under foreign flags, carry goods directly from the United States to this rich market. The 1. Senate Document 1907-08 #225 p 15. 2. ibid p is. 3. ibid p 20. / 9 mails and more valuable cargoes are almost invariably shipped to Europe and then back to South America^ largely in foreign ships subsidized directly or indirectly by their governments. This makes it far more sure for the merchant of South America to order from the German or English houses who, in the first place can get the mail requesting shipment more quickly and then can get the goods to him promptly. If the Hew York merchant relies on the tramp, it will be a slow and uncertain voyage. The United States has direct mail lines under the Act of 1891 to Mexico and the West Indies, We send fifty per cent of the imports of these countries. 1 To South America, with a population of similar needs we sent fourteen per cent o^^^g^ppbrts in 1910 and this percentage is decreasing relatively. 2 With the opening of the Panama Canal the west coast of South America will be many miles nearer Hew York and Philadelphia than London or Bremen. As regards the present situation, John Barret, no?/ minister to Panama and formerly minister at Argentina, said in 1904, "The business men of Buenos Ayres can write to Europe and receive a reply in fifty days. It is very seldom that they can commun- icate with Hew York and Chicago and get an answer in less than eighty days." Hutchinson, special agent to Uraguay says, "There is no direct passenger service from United States to Chile on the River Platte .... The passenger service from the United States is greatly inferior in all respects to that from Europe, and the American people have little inducement to 1. Senate Document 1907-08 p 19 2. ibid 3. ibid 60th Session #225 p 68. 10 visit and get personally acquainted with commercial and in- dustrial conditions in these South American countries." 1 A. J. Sampson, American minister to Quito says, " I was informed by a prominent merchant here that freight rates were fivefold greater from New Yor^ to Guayaquil than from Hamburg to the same place."*' As has been often pointed out, it is only to be expected that subsidized and other foreign lines will use their influence to throw trade to their respective countries. Moreover a number of thinking men seem to believe that there is some magic about the particular flag which flies over the ship, that the ship acts as a sort of advertising medium. The Trans-Mississsippi Congress in 1903 passed a resolution "That every ship is a missionary of trade." There remains one more point at least to be disposed of. It is often pointed out that our foreign export trade has in- creased by leaps and bounds. On December 9, 1911 President Taft pointed out that we had just gone through a year of un- precedented increase in foreign trade. This condition would seem to indicate that there is no cause for alarm and that any money spent to revive a merchant marine would be a needless expense. The manufacturers allege that the number, or at least the size and volume, of manufacturing plants is on the same increase. It is a question of a few years at most until we must enter that life and death competition in which England and Germany are engaged now. 3 Many of the great industries 1. Senate Document 60th Session #225 p 69. 2. ibid p 70. 3. ibid 1907-08 #225 p 19. of the country are tending to over-production, and relieving the situation by selling at prices even below cost. These merchants will seek foreign markets with increasing vehem- ence in the years to come and if, as so many point out, a carrying fleet of merchantmen will he almost a necessity, some expense may be justified. Japan and England, have most of the trade with China and the Orient. Both countries have subsidized lines running from Vancouver to Japan and the West. The Oceanic Company, an American corporation which'.arried mails under the Act of 1991, went out of business in 1907, and thus stopped regular direct connection with Australia and Uew Zealand. The Chinese are opening up more and more as a nation and changing their standards of living. There is every reason to believe that it will yet become one of the greatest com- petitive markets. The Philippines and Hawaii are covered by the coasting trade restrictions, 1 but as yet no regular lines have been es- tablished, even under the extreme protection of the law. It is easy to believe that if a merchant marine would not do all that its admirers claim for it, it would at least be a strong help in the extension of our shipping and markets. 2 As Mr. Johnson points out, there are two great arguments for government aid to a merchant marine, commercial and econ- omic arguments and naval and military arguments. We have touched on a number of the commercial and economic aspects of the need of a merchant marine, let us now consider what naval 1. Navigation Laws of United States 1907 p 238,244. 2. Johnson, Ocean and Inland Transportation, 317. and military arguments can "bo adduced for it. The navy of the United States, consisting of dreadnaughts , battleships and cruisers, is not all of the fighting complement by any means. Without coal, these grim monsters would be like the proverbial dragon with his teeth drawn. 1 Colliers then are prime essentials to a strong navy. In times of peace the warships can coal at the home ports or in foreign ports, but in time of war, it is essential that each warship shall have a collier which can keep up with it and, as foreign ports are closed to belligerents in time of war, these colliers must be fast, strong seaworthy vessels. A strong subsidized merchant marine, built under specifications approved by the navy department furnishes just this kind of ship. Germany and England depend on their merchant marines for this service. In 1905 when our battleship fleet steamed around the world, American colliers could not be procured, so they were forced to hire vessels flying a foreign flag. The naval board, in the report submitted in 1905 by Admiral Bewey, stated that they were much hampered in the Spanish War by the slow- ness of the colliers, and against a more active and vigorous foe, this cumbersomeness might have proved fatal to success. But colliers are not the only branch to be considered. On page 3£ of the report of the Merchant Marine Commission will be found a long list of the types of auxiliary vessels that are absolutely essential to the needs of modern warfare. "Eight twenty knot scout ships" heads the list, vessels that must be fleet enough to outrace the fastest battleships. 1. This field is covered in Senate Document 1907-08 #225 p 30-47. Ammunition ships, hospital ships etc. suggest other needs. Today we have eleven large ships in the foreign trade fly- ing the American flag which would be suitable for this pur- pose. We need over a hundred to give us any parity with England and Germany. The advantage of a merchant marine for this purpose lies in the fact that it can be used in times of peace to carry our commerce and thus they are kept profitably and. economically employed instead of waiting in idleness for war to commence. Then in the event of war, when they would be subject to seizure, they can aid the gov- ernment navy to the best advantage. It is quite a classic argument that since we are spending $140,000,000 a year to make our navy strong, we might spend from from three to ten millions to make our battleship fleet efficient like those of other strong naval powers. Since the United States has acquired insular possessions, their defense from the military point of view depends large- ly on the chances for quick transportation of troops. Ships should be of sufficient size to carry an entire battallion of troops with accoutrements, and a ship of this size is found only in the large merchant vessels of the deep sea type, rather than those of the type found on the Great Lakes on in the coastwise trade. It has only been since the Spanish War that the troop transport problem has arisen, but it is a prob- lem which must be solved if we are to be a world power from the military and naval standpoint. We have considered then so far the need of a merchant marine in relation to foreign shipping and commerce and in 14 relation to the navy and army. We shall next take up the need with relation to the general economic development of the country. The well salted old argument arises again and again to confront us, that we are allowing $200,000,000 a year in freight to go to foreign shipowners which would be saved if we built our own ships and carried our own goods. But the answer to this contention is that this large sum of money is only the value of part of the profits of these countries which have an enormous capital invested in ships to produce it. In the United States we have put our capital into railroads and western improvements which pay a higher return on capital than shipbuilding and operating in Europe. The same Solons of wisdom point out to us that immense bands of laborers would be put to work in our shipyards, but they must show, to establish their point, that these laborers are not being taken away from more productive industries than shipbuilding. The scope of this work does not permit me to go into a detailed history of shipbuilding in the United States. The facts in brief are that shipbuilding has been slightly on the increase since 1900, owing to the demand for lake vessels and ships for our coastwise trade. But since 1905 not one keel has been laid in American yards of vessels designed for the for- eign trade. The reason is simply, that we cannot compete with the Scotch and German shipyards. The government aid given to shipbuilding in these countries, which will be dis- cussed later, is one factor. But the three other factors are more potent. 15 1« It is claimed that materials can "be purchased more cheaply in England and Germany than in the United States. The dumping- of the American surplus steel products in conse- quence of the tariff may make steel sell at a price even below cost in Belfast while a high rate is maintained at home. This would seem to be met by the law which allows materials to be admitted free of duty. It would seem that the American shipbuilder could purchase steel in foreign mar- kets and import it. But the reason this is not done is, first, because of a further provision of the navigation laws, which prohibits vessels constructed of foreign materials from competing in the coastwise trade for more than two months a year, and secondly, the facts that the plates are often in- jured in transit from Europe to United States. Then the fluctuation of the steel market in a country with a tariff wall makes the construction of vessels in competition with English construction under a more stable market, more hazard- ous. 2. Labor costs are higher in this country. It is often averred that a ship is nothing but a combination of bridge and locomotive, and since we construct these more cheaply than any other nation on earth, there is no reason why we cannot build ships more cheaply with our more efficient, if better paid, workmen. Higher wages are due in part to the high tariff wall which is only one of the many factors in the complex that make the cost of living higher in America. This is one factor which we must overcome when we get ships and com- mence to hire sailors. Americans in almost every wage-earning department demand more money than foreigners. There la no way to estimate the efficiency of American shipbuilding labor as compared with English and German, but there seems to be a decided opinion among authorities that American labor effic- iency in this line is not enough to offset the higher wages prevailing in this country. 3. The lack of standardization in shipbuilding is keen- ly felt. When the European yards are turning out several vessels of the same type they can figure on piece work with their labor, which becomes more efficient as it has success- ive practice on the same kind of work. Much of the boasted superiority of American workmen is because of this duplication of work, the working out of the economic law of the division of labor. There was testimony before the Merchant Marine Commission to the effect that we build vessels for our inland waters more cheaply than ships of this same type were being built on the Tyne during the same period. But such statements must be taken with caution when we remember there is no sure test of comparison, because no foreign built ship can be purchased for our inland or coastwise trade. It would be rash to say just what would be the British bid for vessels of this type against American firms. In the building of battleships our shipyards have shown themselves very efficient. The Merchant Marine Commission state that we have built and sold ships for foreign navies in competition with bids from England and Germany. The large demands for vessels for our own navy have built up a condition (. of duplication closely approximating the conditions in the general shipbuilding industry in England or Germany. The question often arises (which will be treated more fully in the next chapter) , why do we want to revive a ship- building industry in this country when it is now suffering under all these disadvantages? One reason is that if a paying industry can be developed after it has overcome the initial disadvantage and inertia, it will add to the sum of the country's wealth. The criticism of this statement will be taken up more fully in a later chapter after we have con- sidered the foreign experience with subsidies. 10 GHAPTEK III ENGLiflS ASD HER MERCHANT MARIIiE SliJCE 1900 The students of the merchant marine problem have always turned eagerly to the mistress of the seas to discover, if possible, the secret of her great success as a shipbuilding and shipping power. Each year has seen a steady increase in England, both of the tonnage operating under the English flag and the tonnage of ships built in English shipyards. 1 The navigation laws of England are probably the most liberal in the world today. The coasting trade is not re- stricted as is the case in the United States, and vessels, no matter where built, are admitted to registry under the British flag. 2 However, all ships receiving subsidies from the British government must fly the British flag and the Cunard contract of 1904 required that subsidized steam ships shall be built in the United Kingdom. 5 Before entering into a discussion of the English subsidies, it will be well to note that England is an island with manufact- uring and commercial interests so overshadowing agriculture, that she is compelled to depend almost absolutely on foreign sources 1. Foreign Trade of the Home Trade of the United Kingdom United Kingdom 1900 0,290,000 Tons 1900 040,160 Tons 1901 0,422,414 1904 066,078 1902 8,627,090 1906 009,012 1903 0,903,309 1907 940,130 1904 9,160,021 1905 9,361,750 1906 10,100,547 Report-Commissioner of navigation 1907 p 106-107 2. House Document Volume 46 #564 p 43. 3. ibid. 19 for food supply. Hence her supremacy on the seas is the only hope of her national salvation, and her liberal policy toward shipping from the earliest days of .English history is partly explained by this necessity. It would be interesting to go back to that early history and trace the rise of England through the navigation laws and fishery bounties; through the great period of her rivalry with American when the defeat of the latter was assured by the fall of the Collins Line; but we must leave this portion of our story to other writers. The year 1900 saw England with a merchant fleet of 34,875 vessels whose tonnage was 10,751,392?- United States came next to England that year with a tonnage of 5,524,218. 2 German tonnage was 1,443,976 that year? Thus her nearest rival was far behind her, and the discrepancy is really much greater than the figures show, because only 900,000 tons under the American flag were engaged in the foreign trade while England had 8,200,000 tons. Germany was insignificant then as compared with England, and France, as we shall see later, was going back- ward. In 1910 the tonnage of England was 19,012,294, United States, 7,568,082 and Germany, 4,333, 186 f The important thing to not- ice is the rise of Germany, and it is a matter of regret that we cannot go into their history along these lines. So from the standpoint of tonnage of ships, England is still supreme. Let us now take up the subsidy system of England as it ex- 1. Report-Commissioner of Navigation 1901 p 471. 2. ibid p 9. 3. ibid p 4Q6. 4. American Year Book 1911 p 524. 20 ists today. l« In 1904 the British government passed a law making a yearly appropriation of 319,954 pounds ($1,500,000) for pay and allowances to naval volunteers serving on merchant and fishing vessels. This appropriation was made for twenty years. These men, mixed with the merchant crews and doing duty as seamen and officers on the ships, afford a valuable nucleus for a warship crew if the vessel is converted for war purposes. This money is a subsidy in that the ships are get- ting the services of the men without paying for them. 1 2. The Cunard admiralty subvention under the twenty year contract, beginning in 1905, is fixed at $729,000 a year. 2 For this the Cunard Company places all its vessels at the disposal of the government in time of war and agrees that all ships built by them shall be done upon plans drawn up or approved by the Admiralty Board of England. 3. The mail contracts are the most important item of the English subsidies. These mail contracts have been granted for three purposes, fa) To secure faster and more frequent mail service with other countries, (b) to encourage the building of merchant vessels that may be of service in time of war, (c) to strengthen British shipping that it may meet the competition of its rivals more easily. 3 The legislation of the early part of the decade is large- ly the result of the House of Commons Report on Steamship sub- 1. Johnson-Ocean and Inland 7ater Transportation, p 293. 2. Report-Commissioner of Navigation, 1902, p 66. 3. Johnson-Ocean and Inland T/ater Transportation, p 294. sidles, printed in 1901. This was the period of agitation for subsidies in America and the attitude of England toward any aid to a merchant marine in the Unitied States is indi- cated by questions 1918 and 1919 in this report. 1918, "Would it be very difficult to compete successfully having regard also to the preferential rates in America? Ans. It would be very difficult to compete. 1919, "Is not this law a very serious matter to British ship owners? 1 Ans. The whole question of this subsidy is a very serious question to British ship owners." In August, 1903 the Cunard subsidy bill was passed by the House of Commons by a vote of 92 to 18. The first provision of note was that the Cunard Company should build two large steamships, having a speed of from twenty-four to t.venty-five knots an hour to be run in its line between Liverpool and lew York or between other ports in Great Britian and the United States. 2 These ships were to be built in England under plans approved by the Admiralty Board. In fact all ships built by the company must be built in Jingland if they have a speed of seventeen knots or upwards. Eo charter party is allowed to be let out without notice to the admiralty, and provisions to project British citizens against undue dis- criminations are made? Part of the crews, including the of- ficers and engineers in charge of the watches, must be British subjects. Heedless to say, these vessels must all be registered under the British flag. On the two new vessels, pillars and mountings for guns were 1. Report-Select Committee on Steamship Subsidies, 1901, p 114. 2. Report-Commissioner of Navigation, 1902 p 225. 3. ibid p 227-229. 22 provided for in the contract. m return for all these provisions the company was to receive 150,000 pounds per annum as mentioned under (2) above. The most peculiar feature, and incidentally showing how subtle may be the form that subsidies sometimes take, was the provision that the government should advance 2,600,000 at an interest rate of Ef per cent} This amount covered the cost of the two ships and so capital for this increased value of the Cunard shipping was received at a lower rate of interest than they could have obtained otherwise. if we take the interest rate as 4» it is easy to figure that this indirect subsidy amounts to 52,000 a year. The second part of the contract relates to the carriage of the mails, 68,000 pounds a year was provided for this; and advance of 14,000 pounds over the agreement of 1899? Some of the special resolutions of the Cunard Company, passed in 1903, show the attitude of the owners of the British merchant marine toward their government. Article two reads, "It is to be regarded as a cardinal principle of the company that it is to remain under British control and accordingly, fa) no foreigner shall be entitled to hold office as a di- rector or be one of the principal officers of the company. fb) Bo share in the company shall be held in trust for, or be in any way under the control of any foreigner or foreign corporation or corporation under foreign control. fb) of section two was put in to guard against the poss- 1. Heport-Commissioner of Navigation 1903 p 229. 2. Report-Commissioner of Navigation 1903 p £34*. 23 ibility of an amalgamation with the lately formed International Mercantile Marine Company which is controlled by American cap- ital. The Committee of the House of Commons on Subsidies said in 1901, "British policy has been to subsidize ships for postal or admiralty purposes only, and to exclude all considerations of trade interests"; but they also add "Even in the British case rapid postal communication has followed mainly the lines of great commercial traffic. 1 But while this is true, it is also true that fast mail communication has given a great stim- ulus to trade and paved the way for more frequent voyages of the unsubsidized merchant ships. The principal lines in England which receive subsidies besides the Cunard Line are the Peninsular and Steam navigation Company, the Orient Steam navigation Company, the Canadian Pacific Railway Company, the Royal Mail Steam Packet Company, the British India Steam navigation Company, and the Pacific Steam Navigation Company. 2 It has often been remarked that the combined tonnage of these subsidized companies is only an insig- nificant fraction of the total tonnage of the British merchant marine, so that, although it is an aid to have fast line, the great success of the British merchant marine is not due solely to it by any means. According to Royal Meeker, unsubsidized lines which run in competition with the above mentioned lines, pay, in some cases, higher dividends, showing either that sub- sidy leads to lax and Inefficient management, or that other and special factors place subsidized lines at a disadvantage. The 1. Report-Commissioner of Navigation 1905, p 268. 2. Report-House of Commons Commission on Subsidies, 1901, p 290. 24 White Star Line is generally supposed to pay higher dividends 1 than the Cunard Line although the White Star Line gets no sub- sidy. The V/est India and Pacific Mail Steamship Company and the Royal Mail Company run over much the same route, yet the latter has earned five per cent dividends and the former twelve per cent? Still dividends are a poor basis to judge the prosperity of a company by and these isolated examples may not be fair. It is well known that profits instead of being paid out in dividends may be turned back into the business and reinvested. Such management is in many instances accounted better business than a sapping of the strength of a corporation by the paying out of profits to stockholders. True it is that the English government has ever turned a sympathetic ear to appeals from the big mail lines for state help and it seemed the opinion of the committee in 1901 that the policy of subsidizing ships was a wise one, to insure com- petition when it was threatened. It has been advocated that the relative shrinkage in the percentage of the world's commerce, carried by British vessels should be met by reserving the coastwise trade of the British Empire to ships flying the English flag, but this has not as yet been done. England has viewed with alarm the large number of English shipping firms taken over by the International Mercantile Marine Company in 190£. Any of the ships having mail contracts with the English government are required to fly the English flag 1. Royal Meeker-Shipping Subsidies, p 39. 2. ibid P 41. and remain under English registry. American financiers owned 672,000 tons under the English flag in 1900. 1 In 1907, 329,837 tons were transferred from the English to foreign control, while in the same year only 22,170 tons were transferred from foreign control to the English control. 2 England today has many various items in her subsidy bill, which has increased steadily as the years have gone by, partly of course, because of the fact that services have increased, the pay for which is not differentiated from subsidy. In 1910 the items were as follows: 3 Subsidies and mail pay $3 320 454 Cunard Admiralty ' 729*000 Royal Naval Reserves 1 783*620 Canadian Fisheries Bounties 'l6o'oOO Canadian Subsidies and Mail pay l 581*800 Australian & Uew Zealand Subsidies 1*263' 600 Cape Colony Subsidy '656*910 Jamaica Subsidy 194*000 In ship building today England easily leads the world. 792,000 tons were turned out in her shipyards in 1907. 4 The standardization yards on the Tyne have been pointed to by American subsidy advocates as an example of what economies a healthy start may bring forth. However, these yards do not receive any government aid, while German yards and French yards do, yet the British shipyards are still supreme. In conclusion then we may say that England is not follow- ing at present a very extensive subsidy policy if we consider that policy with relation to her whole merchant marine. The indications of the past would lead us to believe, however, that did American adopt a subsidy system, England would be prepared 1. Report-Conmissioner of Navigation, 1900, p 34. 2 * iMd 1908, p 105-104. 3. American Year Book, 1910, p 525-26. 4. rieport-Oomniissioner of Navigation, 1908, p 103. 2G to meet us with increased rates if her supremacy on the sea was threatened. 27 CHAPTER IV. FRANCE AMD HER MERCHANT MARINE The foes of subsidy triumphantly point to the experience of France to show us the shoals of national error into which we will fall if we attempt to "build up a merchant marine through the stimulation of government aid. We must go back to that father of French manufacturers, Colbert, to find the first working out of a protective system to upbuild a French merchant marine. 1 His system, copied after the system of the English Navigation Laws, existed with its many strict restrictions in slightly modified form until 1866, when Napoleon III, in the furtherance of his policies tending toward free trade, secured the passage of a law reducing the duty on foreign built ships, and admitting material for ship building free of duty, 2 but in 1872, following the economic pol- icy of France, which was again tending toward protection, the French Republic attempted to inaugerate a system of discrimi- nating duties in favor of French ships, but the threatened re- taliation of all the leading commercial nations, including the United States, compelled a suspension of the policy before it had been in force eighteen months. The Legislature next busied itself with a formulation of a policy of subsidies, which found expression in the law of 1881. Lack of space forbids our going into detail in the descrip- tion of these earlier laws, the provisions of which are very in- teresting and curious, and afford in many instances some of the 1. Mahan- Influence of a Sea Pov/er on History, p 105. 2. Viallates-How Franco Protects her Merchant Marine IT. Amer. Rev.p 184. 3. House Document 59-1-Vol. 48-37. most glaring examples of human folly and extravagance. The leading provisions of the Act of 1881 amounted to a division of subsidies into construction and navigation premiums, lim- ited to ten yearsj This construction subsidy was calculated on the basis of the duty on the same material used in ship building if imported. While ship building was stimulated to some extent, the approach of the close of the ten year period brought about an almost entire cessation of work in the ship- yards. 2 So in 1893 the Legislature busied itself in formulating a new law. This cut off bounties to foreign built ships, and increased construction premiums, which were declared to be a compensation for the charges imposed on ship builders by the customs tariff; navigation bounties were declared to be a com- pensation for the burden imposed on the merchant marine as an instrument for recruiting the military marine." The most pecul- iar feature of the law, however, was the relative preference given to sailing vessels in the form of higher premiums, on the theory that a parity of competition ought to be maintained be- tween steam and sailing craft, and because merchant sailing ships were regarded as the best school for seamen. 4 There re- sulted the strange phenomenon of a steady increase in the sail- ing fleet, that class of ships which the advanced nations of the world were discarding, while on the other hand, the number of French steam ships remained stationary? It was during this per- 1. 3acon-Manual of Ship Subsidies, p 29. 2. Engineering 81-583-Frer.ch Subsidies 3. Meeker., T7ells. Our Merchant Marine, p 163 note. 4. Engineering;, 81-588. 5. ITorth American Review, p 184. iod that the bounty scandals reached their height and sailing ships were traversing the ocean in ballast alone and earning large dividends from the bounty. The ship owners complained that the ship builders merely added the bounties to the cost of construction and pocketed the moneys- It was this mismanaged and unscientific state of affairs which was in existence at the opening of the period which we are now considering. The obvious defects of the law led to' its supercession by another act further enlarging the bounty system. The Law of 1902 provided for three kinds of subsidies, fa) Compensation d' Armement paid to steam ships of foreign con- struction at the rate of ten cents for a minimum of two thousand tons to four cents, for four thousand to seven thousand tons per gross ton, total measurement, and per day of foreign trade under the French flag? fb) Prime k la navigation, paid to all French built ships at various rates per one thousand miles per ton gross measurement. There was no encouragement whatever for the build- ing of steam ships over seven thousand tons or for sailing ves- sels of over one thousand tons. Thirty million dollars was ap- propriated to last twelve years? (c) Prime k la construction for twelve years to cover ship building up to three hundred thousand tons gross of French built steamers and one hundred thousand tons gross of French built sailing vessels^ but the ap- propriation for the payment of the bounties, limited to guard against a too heavy burden on the national treasury was inade- quate to cover the tonnage mentioned in the bill, and so to quote Professor Viallates: "To be sure of profiting by the ad- 1. Bacon- p 31. 2. Engineering 81:588. 3. ibid 589 4. ibid 589. vantages of the law the ship owners hastened to order vessels and to place them on the stocks. Their haste increased when it was seen that there existed a considerable discrepancy be- tween the allowed tonnage and the money appropriated. The appropriation of one hundred fifty million francs open to assure the payment of the navigation and the compensation for outfit was much too little. The rush was such as soon as this formidable mistake was discovered that less than nine months after its promulgation the useful effect of the law was com- pletely exhausted." 1 The last law on the merchant marine was passed in 1906 and in considering it we shall take up the whole scheme of French subsidies in force at the present time. The first class of bounties which we shall consider are the bounties on ship building under the Law of 1906. The Trench maintained construction bounties not only to equalize the custon duties effecting the material . employed, but also to give builders a compensation sufficient to enable them to con- cede to the French ship owners the same prices as foreign build- ers. The rates are fixed on gross measurement; for iron and steel steam ships, one hundred forty-five francs per ton; for sailing ships, ninety-five francs per ton; these bounties to decrease annually by four francs and fifty cemtimes for steam ' ships and three francs ninety cemtimes for sailing ships, dur- ing the first ten years of the law's application, thereafter to stand at one hundred francs and sixty-five francs respectively; for engines and auxiliary apparatus twenty-seven francs fifty cemtimes per hundred kilograms? When a ship is enlarged with a viev/ to increase its carrying capacity it is paid a subsidy on the number of tons it has been increased. The above figures are for ships with hulls of iron or steel; for wooden ships the amount is less. The subsidies are put at a high figure at first, 1. North American Review, p 184. 2. North American Review p 184 , 1907, Yiallates. 3. Engineering 81-589. 31 especially on machinery?" but are to decrease during the first ten years presumedly on the old Infant industry theory. Seven tenths of the construction bounties are payable when the ship is registered in French service, or started on effective trading if not in French service. The balance is paid to ships under the French flag only, two tenths one year after date of register and one tenth the following year. 2 Thus the purpose of this part of the law will be seen to be not only to increase the French built ships in the French merchant marine but to give French shipyards a world market. The third class of bounties which we shall consider are the navigation bounties and the provisions will be seen to have been made with a view of separating the ship builder from the ship owner, and thus, avoid the evil effects of the law of 1893. The navigation bounties to owners of French or foreign built ships under the French flag was calculated per day of actual running: for steam ships, four cemtimes per ton gross up to three thousand tons; three cemtimes more up to six thousand tons; two more for six thousand and above? for sailing ships three cemtimes per ton up to five hundred ton, two more up to one thousand and one more to one thousand and above? These grants depend on the miles made per day in relation to the ships' trial tests for speed; for instance, ninety miles a day for those which at their trials, obtained a speed of fourteen knots or over. For sailing ships the average run per day is to be thirty-five miles. The owners must certify that they have carried freight equal to one 1. Engineering 81-589. 2. ibid. 3. Bacon 35. 4. Engineering 589. 32 third their net tonnage at all times from the date of their leaving a French port to their return to a French port, and that freight has been carried over one third of the total distance run by the ship. 1 The minimum trial speed of all vessels re- ceiving subsidies must be nine knots. The total cost of the French bounty system in the twenty-four years from its estab- lishment, with the Law of 1881 to 1904 when the Law of 1902 had practically run out was in round numbers upward of three hundred eighty-one million francs. It is estimated that the new law of 1906 will absorb eighty-four million francs in seven years. 2 We now come to the last form of subsidy in France, the postal subvention. The amounts paid to mail lines are nominally for services rendered in carrying the mails, and transporting gov- ernment officials and state stores at a reduced price, but it is a well known fact that these amounts are far larger than amounts paid for like services in other countries, so we must agree with Royal Meeker that the greater part of the subventions undoubted- ly go to the ship builders and are, therefore concealed subsidies. There is no competition in the letting of mail contracts which to to four steamship concerns. 3 More than one half of the total steam tonnage of France is owned by these four subsidized lines; the Compagnie Generale Transatlantique , the Compagnie des Messageries Maritimes, the Chargeurs Eeunis, and the Compagnie Fraissant^ These subventions are both greater in amount and more influential upon ship building, navigation and commerce 1. Engineering 81-509. 2. 3acon-I7orth American Review 1907, Vol. 184, p 35. 3. ibid P 36. 4. ibid ^ 36. zz than are the general premiums upon ship building and naviga- tion. 1 These mail lines run to .New York, Quebec, St. Johns, Corsica, ports in the Mediterranean and Black Seas, Brazil, Indo-China, Japan, Australia, Africa and several British ports. 2 It is a notorious fact that the four lines do not compete with each other, but pool their rates and bids in advance? The amount paid in subsidies for this service will be given later. There is one peculiar subsidy under the guise of mail contracts which has been concluded during the period which we are consid- ering and that is the Franch-Canadian subsidy Act 1904. This was let to two English and two French ships which were to run between ports in France and ports in the Dominion. The con- tract was for ten years, and the remuneration is $100,000 to $133,000 a year for eighteen voyages. 4 Thus having in mind the general outlines of the system, it will be seen that the weakness of the present law is one which has been found in all the previous laws, namely that its operation extends over so limited a time (twelve years in this case) , that not enough ships will be built in this time to receive subsidies which can be assured to the ship operators; this period should have been longer.^ Moreover, in spite of the obvious provisions, the subsidies have not enabled the ship builders to compete in the world market. 6 However, the provision that engineering works will only benefit by the law if they do not have more than ten per cent of foreign workmen, is recognized to be a good one, and also the provision that ships under the new law 1. Meeker, p 67. 4. P.eport-Comnissioner of ITav. 1903 ,p 287 2. ibid p 68-70. 5. Engineering 81, p 589. 3. Bacon, p 36 6. ibid p 589. 34 can be built with a tonnage of over seven thousand and receive commensurate subsidy is a wise addition. 1 Having now in mind the general history of shipbuilding and shipping subsidies, the following statistics of construction of ships and tonnage will show a close relation to the varying pro- visions of the different subsidy laws. The last form of govern- ment aid which we shall consider is fishing bounty. The act now in force to aid fisheries was passed in 1890 and provides for an annual bounty of fourteen, thirty or forty francs per man employed on a fishing vessel, depending on kind and location of the fisheries aided. There is a bounty on importation and exportation of fish. Tons of Vessels Built in France (Construction) ~ Sail Steam Ko. Tons Ho. Tons 1890 18 6,896 IE 15,083 1900 52 70,224 13 31,094 1902 86 107,845 15 48,974 1904 27 4,611 25 75,506 1906 7 1,069 26 32,299 1907 8 1,103 36 67,010 Tonnage of France 1850 1880 1900 1905 1906 Steam 13,925 277,759 527,551 711,027 727 047 Sail 674,228 641,539 510,175 676,193 487,'458 Total tonnage in 1910, 1,882,280 The bill for subsidies in 1908 for France was made up as follows: Navigation and Armament Bounties 16,079,500^ Mail Subsidies 5,217,037 Ship Building Bounties 2,007,200 Fisheries Bounties '120,' 000 1. Engineering 81-509 2. American Year Book 1910, p 526. 13,423,737 35 When we compare this large sum with the $9,000,000 spent by England with her tonnage of 19,012,294, we should expect as a matter of logic that France would be a formidable competitor but such is not the case. In 1910 her total tonnage was only 1,882,280* Although the tonnage of France has been on the increase, the French subsidies have been on a relatively larger increase. Thirty years ago, when the infant ship building industry knocked timidly on the doors of the Legislative Halls for aid to enable itself to get firmly on its feet to compete with England, he would indeed been a rash prophet, who would have ventured to voice the prognostication that the infant's demands would have grown to their present proportion. Royal Meeker says that activity and efficiency in the shipyards have decreased, that subsidies have sapped the vitality and soul from French maritime enterprise and left it a giant infant industry whose weakness increases with age. 2 Although labor is cheaper in France by one half and the general expense of construction less than in England, English efficiency turns out far more units of work for the same wage than the French? However, great shipyards have been developed, capable of build- ing the largest merchant steamers and armor clads and the naval reserve of merchant officers and seamen has been created. 4 Consul General Skinner (U.S.) of Marseilles, says, "There is no doubt whatever but that the payment of subsidies has in- creased the number of French ships engaged in foreign trade. 5 1. Bacon, p 36. 2. Meeker, p 04. 3. Engineering 81, p 589. 4. Senate Report # 10, 59th. Congress, 1st. Cession. 5. ibid. 36 We must also remember that the French are not inherently a maritime people and their struggle for a share of a consider- able portion of the traffic of the seas is met by the native aptitude of the English especially, who in the past, have signally defeated the French in many naval encounters. 1 Still the present French system can not be so iniquitous as some of its most virulent critics would have us believe, because Italy, with the same knowledge of the French experience has with a few improvements, adopted the same system. We may say in con- clusion that the story of France, taking into consideration the inherent character of the people, making due allowances for faults in the framing of the laws, rather than in the gen- eral theory which underlie them and remembering the fact that Italy and Japan, the merchant marines of which countries are generally conceded to be in a prosperous condition, have adopt- ed the same system, so far as essentials go; is not conclusive proof, but only strong evidence that subsidies are more a bane than a blessing to countries which are seeking a means to build up a merchant marine. X. 7,'ells, 164, House Document 4S #225. CHAP Mi V. THE RISE OF JAP AH. At the close of the Russo-Japanese War a new sun arose in the Orient to add its brilliance to the brilliance of the suns of other world powers. The astonished, and it must be confessed often, the troubled eyes of the great powers were fastened upon her. The great warship fleet of Admiral Rodjenvetsky had been utterly defeated. The glory of the victories of the island empire on land was equalled only by the deeds of her warships. The beginnings of shipbuilding in Japan are almost as romantic and unreal as the thousand and one legends that are woven around almost every national institution of Japan. In 1854 the Russian ship Diana, lying at anchor in the port of Shimoda, was washed ashore by a vast tidal wave and demolished. The Russian captain, wishing to get his men back home as soon as practicable, decided to build new ships and hired Japanese workmen to aid in building them. These Japanese ship car- penters treasured the knowledge they acquired, and thus became acquainted with the western type. Many of these "foreign" models were built in the ensuing yearsf In 1870, responding to the repeated invitations of the emperor that any Japanese ship company which would establish communications with foreign countries would receive substan- tial aid from the government* the Kwaiso Kwaisha, (later the Japan Mail Steamship Company) was organized, and the ships 1. Ueeker - 235 2. Engineering 86:199 of both these concerns aided the Japanese government material- ly in the Formosa Expedition of 1873. In 1886 an amalgam- ation of all vessels under the name of the Japan Mail Steam- ship Company was effected* The subsidy to this firm was at first in the form of a guarantee of eight per cent dividends, but this was commuted in 1887 to a subsidy of 800,000 yen annually? This enter- prising company made show but sure progress, enlarging its trade from the coastwise traffic to the near foreign ports. In 1892 it had a line to Bombay and its vessels were making isolated trips to Australia and the United States. On the conclusion of the Chinese War in 1894, when this line rendered the government efficient service, new bounties were granted it and its capital stock increased 2£,000,000 yen ($16,500,000). The new 6,000 ton steamers were built, for the most part in the aiyde in England, though with a reserve of a sufficient number for Japanese construction to develop and advance the art of shipbuilding at home. During the Russo-Japanese War the vessels of this line were converted into auxiliaries for the navy, where they gave excellent service and contributed in no small degree to the wonderful victories of the new sea power? In recent years !• Engineering 200 2. ibid 200 3. ibid 86:199 39 the new ships have all been "built at home 1 . Another company is Asaha X. K. Company, established in 1884. Until 1907 it maintained a line of steamers on the Yangtse River in China, but after the war these were not replaced. The chief interest for us in the fact that in 1908 the keels of six 6,000 ton steamers for the American trade were laid in Japanese shipyards by order of this com- pany. It has always received government bounties and these new ships will furnish regular freight connection from San Francisco to Japan? The Oriental Steamship Company, another Japanese cor- poration, is now building ten 15,500 ton, nineteen knot steamers for the Hong Kong, Yokahoma and San Francisco run. These are vessels of the most modern type, equipped with Persian turbines and built for the most rapid conversion for war uses. One of the most notable tendencies in recent years is the heroic effort made by this astonishing people to start the shipbuilding industry at home. The problem would be enough to appal most people. There is little coal and few iron mines in Japan. But in 1901 a government foundry was started in one of the small southern islands where coal 1. For convenience only the initials of the names of ships will be given. Since 1905 the the H. LI. , 6715 tons for European service. IT. M. 5539 tons for Australian service. T. LI. 7463 tons for American service six ships in 1908-1910, 8770 tons each for general trading pur- poses. Engineering 86:199 2. ihid 203. and iron were found together. Other deposits have been worked up since then and in 1908 the Imperial shipyards at Yahosura got all their steel plate and channels at home. In the northern part of the island in 1909 and 1910 American capital is working up a steel business from nat- ural deposits and the Japanese are hopeful that this prob- lem will be met in time. The interior of the islands is heavily wooded, so that timber is plentiful and cheap for their shipbuilders. In 1906 there were two hundred fourteen private shipyards-^ which were engaged mostly in building small crafts. It has only been since 1900 that the Japanese have tackled the problem of steel shipbuilding, but even under the disadvantage of importing most of their steel and most of their machinery from abroad, couples with their lack of technical knowledge in this line, they have forged ahead. Following the Ship- building Encouragement Act of 1896 the output has grown stead- ily with an amazing adaptability to foreign methods. In 1907 the launchings from private shipyards amounted to 73,000 tons? But these improvements and advances have all received the hearty co-operation of the government. The first law 1. Engineering 86:234 2. Launchings for private shipyards. Engineering 06:234 1900 10,763 tons 1903 24,769 tons 1905 32,858 tens 1906 44,452 tons 1907 73,632 tons 41 to aid the building and owning of ships in the "foreign style" was passed in 1870. The law at present in force was passed in 1896 and expires in 1914. Twenty-five yen per gross ton is paid to ships under the Japanese flag engaged in the foreign trade. They must have a tonnage of 1,000 or over and a speed of ten knots or better. The payments vary with the size and speed, reaching a maximum of sixty yen for ships of 6,000 tons and seventeen knots speed. 7/hen steamers get old the amount is reduced. For competition with foreign companies special mail subsidies are given. Thus strong European, Seattle, San Francisco and Australian lines have been firmly estab- lished as indicated before. In relation to shipbuilding there is a subsidy for both hull and machinery. All ships receiving subsidies must be built as models approved by the Japanese Marine Bureau. But aside from subsidies Japan has a wonderful advantage over, not only the United States but also over England as well, in the cheapness of their labor. The average wages of the ordinary American seaman run around $30 a month. The average wage on a Japanese liner is |10 a month. At first the Japanese had American and British officers and largely a foreign crew, but the native Japanese soon picked up the trade and, as a general rule to- day, the officers and crews are overwhelmingly Japanese. They have no fights with labor unions and Chinese coolies can stoke furnaces far more cheaply than white men. There are 57,000,000 acres of timber in Japan which sells more cheaply than in this country. The labor to cut this timber up can be hired for $19 to $90 a year, less than what slave labor cost before the Civil Wart Labor in general can be hired for thirty-two cents a day, while we pay our skilled artisans in our shipyards #4 a day. The Japanese labor is getting more efficient every day as it uses the tools and methods of the West. In addition to these natural advantages, as has been repeatedly pointed out, all departments of the Merchant Marine receive subsidies. The result is that where the American Pacific Mail line, or the British Oriental and Occidental line can barely make profits, the Japanese com- panies pay handsome dividends. The price of the stocks of the two companies may be some indication of this. The Pacific Mail stock in 1907 sold at 47i. The Japanese Mail Steamship Company stock sold at 300 or better in the Bourse at Tokyio 2 . E. S. Bogart says that it is only a question of time until the Pacific Mail Steamship Company will be compelled to transfer its vessels to the Japanese flag? There is one more factor that points to a greater re- presentation of Japan on the seas in the future, and that is the enthusiasm with which the people support the Merchant Marine policies and industries. There is a three years 1. Foreign Resources of the Y/orld-Zan. p 30. 2. Engineering 86:235 3. World's T/ork 17:10940 43 course in the Imperial University of Tokyio in mercantile shipbuilding. In 1908 there were one hundred fifteen students in this course, studying foreign methods and models, and fitting themselves to be foremen and managers of the great shipyards. In the many technical schools of Japan special emphasis is being laid on shipbuilding. 1 The one question that is puzzling is why subsidies should be longer demanded with all the natural resources of Japan. For 1910 the total was made up as follows: Mail subsidies $4,379,000 Shipbuilding bounties 997^000 Fisheries bounties 37^000 One reason is doubtless that Japanese workmen have not yet become efficient and accustomed to foreign methods, and then there is the initial cost in the installation of new lines, and the making of new speed records for the mail ships. Students of the subsidy question will be keenly interested to see whether or not this amount will decrease in the years to come. At present Japan seems to have a brilliant future before her on the sea. It has been only in twelve years that she has arisen from a nation of a few junks to a world power with a Merchant Marine whose darkening shadow bids fair to sweep the American flag from the Pacific. If the intense nation- al enthusiasm does not decline, Japan seems certain to take her place with the world powers so far as her Merchant Marine is concerned. 1« Engineering 86:199 2m American Year Boole 1910 p 525. 44 CHAPTER VI METHODS OF UPBUILDING OUK MERC KMT MARINE So far, we have carried the history of American shipbuild- ing and shipping up to the present time, then we have looked over the situation in England, Japan and France, and have con- sidered briefly, some of the aspects of government aid by which these countries have stimulated the upbuilding, or the mainte- nance of their merchant marine. Let us now come back to our own country and consider some of the methods which have been proposed in order to rehabilitate the American merchant marine. We shall take up the discussion under three main headings; (a) Subsidy, or direct money aid to shipbuilding and shipping. (b) Discriminating duties, or the imposition of higher duties upon goods imported in foreign ships than upon goods imported in American ships. 1 (c) Free ships, or the purchase of ships abroad to be run under the American flag. Various modifi- cations, which will necessarily include the intermingling of the three methods will be taken up in connection with the one whose character is the most distinctive of the whole scheme. We might in this country encourage shipbuilding by direct bounties as it is done in France, and at the same time, by a repeal of our navigation laws, admit foreign ships to American registry, thus forcing our shipbuilders to compete with the builders of Europe. But such a course is rather undesirable and unnecessary, when all that we have to do is simply to leave alone our navigation laws and pay a sufficient subsidy to the shipping interests, which would cover not only the cost of oper- 1. Bates-American Economist, 39-176. 45 ation, but also the increased cost of shipbuilding in this country as compared with Europe. The French system of direct bounties for construction has not been advocated in any bills placed before the Congress of the United States. This is probably due to the stronger pooular feeling against shipbuild- ing interests which have shown a tendency to become monopolistic, than against ship owning interests, which are compelled by their very nature to cope with international competition. Another form of susidy which has been suggested is a direct bounty of a fixed sum per ton, to all vessels built in America which will be run in the foreign trade for a certain number of days a year. This, as will be remembered, was part of the law introduced in 1901 by Senator Fryj2^ It was copied, in principle at least, from the French system. 1 The great ob- jection to this plan is its large cost, for though the bill contemplated only the expenditure of something like nine mil- lion dollars a year, Mr. Bates, after careful estimates had been made by him, decided that like the French law of 1902, this sum was entirely inadequate to build any substantial addition to our merchant marine, and that $40,000,000 would come nearer the cost at the end of the third or fourth year? We are confronted in the United States with the situation, that it costs from twenty-five to forty per cent more to build the ordinary tramp steamer in the United States than in England, and that to build up a real merchant marine the difference in the cost to overcome, under the present economic conditions of the country, will be larger than even the most optimistic advo- 1. Bacon p 87. 2. Sates, American Navigation, p 389. 46 cate of subsidies has dared to speak. There are other advocates oi* subsidies who would discard the idea of granting any direct government aid to the tramp and ordinary steamers, and would confine the subsidy to an extention of the act of 1891 alone. Such in fact, was the law before Congress in 1908 and 1909. It is believed that if we can establish a number of regular lines to South America and the Orient, and can build up a demand for American manu- factures in these places, that the natural demand for shipping to carry this commerce will lead American capital to undertake the enterprise unaided by the government. Some supporters of government aid have ingeniously suggested that we can pay subsidies out of the six million dollars a year profits which the government makes from the transport of foreign mail. This policy they say, will cost us nothing, but of course the fallacy lies in the fact that if you take away profits that would ordi- narily go into the treasury of the government you are really paying directly out of the treasury that amount in subsidy. So much then for direct and pure subsidy. Other writers, amongst them, Mr. W. W. Bates, seem to be afraid of the idea of giving the government money to the snip- ing interests, and they offer as a substitute the plan of dis- criminating duties. One statement of Mr. Bates should be challenged at the outset. He says "(that the adoption of discriminating duties) will thus build up a merchant marine without the cost of a single cent to the government or to the people of the United States. " According to his definition 1. Bacon, p 07. 2. Senate Document, GOth. Congress, Vol. 0, p 35. goods imported in American ships will pay a less duty than goods imported in foreign ships. That means, either that the revenue of the government will be depleted by a sum equal to the duties, or that the people of the United States will pay all additional duty on goods brought in in foreign ships. For in any event it is understood that the people of the United States will not benefit by this arrangement. There are three factors, the shipowners, the tariff and the domestic production. If the tariff is raised or lowered to provide for the discrim- inating duties, and domestic production goes at a lower price than that fixed by the tariff, the merchant marine will not be able to earn any duties because the people of the United States will buy at home, while if the price fixed by domestic produc- tion is the same as the tariff price, the people are still pay- ing for the discriminating duty which goes to the shipowners. Is not this then only another means of subsidy, possessing possibly the virtue that it is indirect, and will not be noticed by the people so readily? Yet after all it must provide the same amount of money as will be necessary to overcome the in- creased cost of shipbuilding and operating under the American flag. As Lyman Abbot says "taxes must come out of the public pocket", and the plan of Mr. Bates is only the plan for an in- direct tax. But it is urged such a plan is more easy of application, than a plan of subsidies, and affords a relief from the fear of corruption which has tainted the history of shipping in the past. It is urged that ships will have to automatically, by ceaseless energy and competition earn the aid which they gain 40 from the government. But this is only one phase of the ques- tion. In 1828 we concluded forty-six commercial treaties with the leading nations of the worlf and one clause of every one of those treaties provided that there should bu no dis- crimination in the way of duties against the ships of the powers with whom we were treating. Thirty-two of those treaties are in effect today, and every one of them must be abrogated before this system could be adopted. lotiee of this would have to be given a year in advance and it is doubtful if the return benefits which we receive at the present time under them could be secured under new treaties leaving out the reciprocity clause. 1 The experience of France in 187£, when she adopted discriminating duties, is particularly in point. It will be remembered that President Grant in connection with the other world powers immediately commenced a series of retaliations which led to the repeal in less than eighteen months of dis- criminating duties and the commitment of France definitely to the subsidy system? Mr. Bates speaks very lightly of these treaties, and still maintains that we are sacrificing more by enduring the present treaties than we would by their abrogation. Much reliance is placed by him upon the fact that previous to 1810 preferential duties were in vogue in this country, and that under them our merchant marine increased at a marvelous rate 3 . But, as has been pointed out the European wars of that period had almost stifled commerce and the American merchant marine only met a great natural demand that was willing to pay high prices for the carriage of goods'! 1. Senate Document, 60th. Congress, p 78 3. Bates, Amer.ITav. p 442. Z ' lbld P 79 4. Scien. Araer. 1911, p 427 49 Moreover in this period there was no high protective tariff wall to make labor and shipbuilding materials high. 1 But aside from the objection from the standpoint of reasons of state the law itself would be most unequal in application, and would fail to build up a commerce with those countries which we are most anxious to reach. The foundation of this whole system is the protective tariff, and yet one half of the imports of American today are on the free list. 2 This statement becomes more formidable when we consider the imports from South America, the country with which we are most anxious to secure more adequate communication. Seventy-five per cent of our imports from this continent 3 , or to make it more startling, ninety-eight per cent of the imports from Brazil are on the free 4 list and the adoption of the plan of discrimination duties would mean a revision of the tariff upwards to place a tariff on these raw materials in order that this scheme might work. As the situation is at present, the shipping interests, to receive the largest benefits would have to seek for cargoes from the manufactured products of England and Germany, which would be contrary to the whole industrial theory of our govern- ment. At the present time we are seeking to export our man- ufactures, yet to the European nations we could only carry such raw materials as copper, cotton, wheat, and corn. More- over it will be seen that no advantage will accrue to a ship in making a long voyage; that the ship which brings a cargo of tropical goods from the Bahamas will receive exactly the same 1. ITot>le-Scien. Amor., 1911, p 429. 2. Senate Document, 60th. Gong-, p 68. 3. Arena, 1906 p 10. 4. Senate Document, 1907, Vol. 8, p 69. amount as a ship which brings the same cargo from South America. The ship owners then will have every inducement to make many short voyages, while our trade with the Orient will be the last consideration with them. Some have urged a preferential rate on goods exported from the United States, but this vague phrase means that we must first have export duties^ which are unconstitutional. So we see in the last analysis that discriminating duties will cost almost the same amount of money as a direct subsidy with the additional disadvantage that it entails many cumber- some features which will tend to defeat some of the prime pur- poses for which a rehabilitation of our merchant marine has been urged. We now come to the third division of the remedies proposed to upbuild the American merchant marine, namely free ships. To repeal our century old registry laws and allow shipowners to buy or build at low prices abroad the ships needed for our commerce, seems at first glance an easy and inexpensive way of securing a large mercantile marine. 1 We shall discuss this proposition first from the standpoint of ships for our foreign trade only, leaving the restriction on the coastwise trade as it now is. The first objection that comes to mind is that which is pointed out in an earlier chapter; that a shipowner could not use his vessel in the coastwise trade when foreign trade was slack, and so his business would be enveloped in a great uncertainty. Other objections will be noted under the premise that we should adopt the policy of free ships for all our trade, foreign 1. Senate Document 1907 Vol. 8 p 84. 51 and coastwise. One of the first things that would be appar- ent is that there are no provisions to meet or offset the ef- fect of foreign subsidies. A large part of this thesis has been devoted to the discussion of subsidies paid by practical- ly all maritime nations of the world today. It will be seen then that there must be the greatest economy in the operation of our ships to offset the aid given to foreign vessels, but when we turn to an analysis of this question we are confronted at once with the higher standard of living which Americans main- tain as compared with foreign workmen in general. And this is not confined to industries on the land alone. For the last eight years the reports of the commissioners of navigation have contained estimates of the wages paid seamen in American vessels, as compared with the wages paid seamen on foreign vessels, especially the English, and in every case it is seen that American wages are from fifteen to forty per cent higher. The wages in American shipyards, and we must remember that labor costs are about half the cost of construct- ing ships, are from fifteen to forty per cent higher than in 2 English shipyards. Moreover the American navigation laws provide for roomier quarters, and the food served on an Amer- ican vessel must be a better quality than that served on foreign z vessels'^ Thus it will be seen that we can look for no econ- omy in the cost of operation to offset the foreign subsidy. It may be urged that v;e could repeal all parts of the naviga- tion laws relating to decent provisions, to housing and feeding crews, that we could adopt foreign crews and foreign standards 1. Senate Document 1908 Vol. 3 2. ibid 3. ITavication Laws of United States, 1908, p 91 R, S. 4612. .1 of living. But in this case it is plain to sea that we would be getting, not an American merchant marine, but a for- eign merchant marine flying the stars and stripes. Even then there is no assurance that our flag would be seen upon the sea, for other countries would attract such ships by their subsidies which do not figure in any pure free ship policy. In fact such has really been the experience in this country. In 1908 the International Mercantile Marine transferred three of their ships to the Belgium flag, partly in order to get Belgium subsidies and partly to take advantage of Belgium standards of living. So we can see that free ships is indeed a plan which costs nothing, but it is also a plan which there is every reason to believe will give us nothing. The Merchant Marine Commission reviewed the shipping policies of all the leading maritime nations of the world, and. the following are some of the significant generalizations that they drew from such com- parisons : "To sum up therefore, it may be said that all the mari- time nations of the world have tried "free ships" in the past, and, disappointed with the results of their expedient alone, have now all turned to some form or degree of subsidy, bounty, or subvention. 1,1 "This question was submitted to nearly all the experienced shipowners of this country (U.S.), "Do you desire 'free ships?" With only one or two exceptions, these practical men replied •1. House Document Vol. 49 p 43. 53 emphatically that they did not desire free ships . . .that free ships would, if adopted, prove a delusion and would be of no benefit whatever toward thu real development of an ocean fleet in the United States." 1 "Free ships are not only discredited by the experience of the world, but are overwhelmingly opposed by the trained judgment of American shipowners." 2 "It is only pottering with a great and vital question free to plead that a^hip policy will of itself enable American shipowners to meet the conditions with which they are con- fronted in the Pacific and Atlantic Oceans." "History contains no record of any nation which has be- come permanently great which bought or borrowed it ships from 4 a rival. " " This compromise might be suggested, that our navigation laws should be so modified as to permit the shipping interests to buy their ships where they could get them the cheapest and pay them a subsidy to operate. Such a policy as any policy of free ships would undoubtedly mean the utter ruin of our shipyards, which have turned out in the past the 25,740 ves- sels of 7,500,000 tons, flying the American flag today. This would mean also that there would be no repairing facilities to maintain such a merchant marine, and the merchant marine built up under such a system would be of practically no use in foreign war when foreign shipyards would be closed to us. To sum up, therefore, it appears that under present con- 1. House Document Vol. 49 p 44. 2. ibid p 45. 3. Uarvin-Atlantic Llonthly Vol. 104, p 439. 4. ibid p 440. ditions, there must be an expenditure of money somewhere, if we are to restore our flag to the seas, that a costless sys- tem would be a system barren of results, and so we come back to the old question; do we need a merchant marine badly enough to warrant the expenditure of money necessary to rehabilitate it. Before attempting to answer this question, let us brief- ly glance at the economic condition in the countries we have discussed, so far as they relate to a merchant marine. 55 CHAPTER VII. ECONOMIC SITUATION IN UNITED STATES, ENGLAND, FRANCE AND JAPAN IN RELATION TO THE MERCHANT MARINE. After wandering through this bewildering maze of expedi- ents which were proposed to build up our lost prestige on the seas, after tracing through the ramifications of laws which have succeeded each other with a rapidity that tells the same old story of legislative mistake, we ask, what are the great underlying bases upon which the maritime prosperity of a na- tion depend? VThat bed rock foundation must a country have to hope to build permanently for the future along the lines of merchant shipping? Professor Johnson says that success in building and oper- ating ships depends upon four conditions: geographic, economic, political and psychological. His able review of the situation in the United States so far as these factors go is the best summary that I have been able to find. 1 However, I do not ar- rive at the same conclusion after a careful consideration of the evidence. So far as a geographic basis for building ships is con- cerned, the United States seems well fitted for the task, The water frontage along the great lakes, the Atlantic, the Gulf and the Pacific is 7,300 miles, and the harbors are sit- uated at the maritime centers of commercial activities. More- over, these harbors are, for the most part, natural, and arti- 1. Johnson, p 511, 2. Johnson, p 312. ficial harbors have been, or are being constructed where need- ed without difficulty 1 . The coal and iron for use in ship- building are, taking into consideration the reduced rate of rail transportation in the United States, close to the Delaware Chesapeake and Lake shipyards. The harbors at these shipyards are deep enough to be used without dredging. The insularity of England coupled with its many harbors, some natural, others artificial, the remarkable facilities for shipbuilding on the Tyne in Scotland, facilities which have been enhanced by artificial works and dredging, makes it an ideal place geographically speaking when we remember that coal and iron are found in abundance at Newcastle and in North England, close to the seat of shipbuilding operations. France on the other hand, although she has good harbors, does not possess so many as England. But a greater disad- vantage is the fact that France does not have coal and iron mines to any extent and such mines as there are do not lie in close proximity to the shipyards. Japan, like England, is an insular nation made up of many islands instead of one. There are large numbers of harbors and the indefatigable labors of the Japanese aided by American capital are opening up iron and coal mines in the northern part of the island. If these mines lead to the foundation of a good iron and steel industry Japan may fairly be said to be well fitted geographically to become a successful shipping nation. And now passing to economic conditions in the four coun- 1. Johnson, 313. tries, it will "be seen that so far as the United States is concerned, we are led to believe "by Professor Johnson that there are few hindrances in the way of developing the ship- building industry. At present the labor cost, which has "been referred to in former chapters makes it almost impossible to compete with England. Capital is abundant 1 and when the out- put is increased and specialization and division of lafcor can be carried further than at present this factor may be overcome as it has "been overcome in other industries. Tariff restraint must "be removed from all materials used in shipbuilding, even for ships in the coastwise trade in order that our shipbuilders may not suffer under a double handicap. But I can not agree with Professor Johnson that the higher of operation of American ships due to higher standards of liv- ing will be met by an equalization of social and other condi- tions on all ships of all nations. To say the least such equalization is not a matter of the near future, and if a sub- sidy were given at the present time as he advocates the chance of such equalization coming ahout would he made more remote "because the "better standard of living would "be insisted upon as part of our national policy. In England, a free trade country which can take advan- tage of the lowest prices in the competitive market, the econ- omic conditions are well suited for shipbuilding. Her ship- yards are standardized and except for the dangerous tendency toward the restriction of output by the labor unions, she is "by natural conditions fitted to be the ideal shipbuilding 1. Johnson, p 316, nation. The wages paid English crews are somewhat higher than the wages paid other crews outside of the United States, hut the low class laborers such as stokers etc. are often .Norwegians and other low priced laborers. The lines to the Orient have Chinese and Japanese laborers in goodly propor- tion. The advantage of an early start in the modern methods of shipbuilding and shipping is a great one. France is like the United States, a country surrounded by a high tariff wall. Raw materials as well as manufactured articles are taxes almost indiscriminately. A bounty is an absolute essential in order to overcome the effect of tariff. But the French suffer under the additional disadvantage that the French workmen are not nearly so efficient as the English or Americans^ The French like the English get much of their cheaper labor from the low class labor of other countries. Additional disadvantages which might be classed as economic will be discussed under the psychological basis. Japan seems to be a poor country economically for the con- struction of ships. But she has two valuable assets, cheap labor and an abundance of forests. We have spoken of the iron and steel there. The labor on board ship is nearly all Jap- anese now and these people with their simple and frugal diet can live on a small fraction of what an American or European would starve on. The shipyards are becoming standardized and they are building more and more ships at home. Her fish- eries employ 500,000 people, who make good seamen and afford a ready recruiting ground for the merchant marine. 1. W. L. George, France in the 20th. Century, 179-199. ■OH turning to the political situation the United States seems to have a -firmer political basis for the development of a merchant marine than ever before in her history. Sec- tional animosity and bitterness have almost died out; if there is sectionalism today on this question it is between the agricultural middle western and the seaboard states. We are no longer a purely agricultural, but are becoming more and more a manufacturing nation. Our manufactures are seeking international markets. We have acquired insular possessions in the Pacific and Atlantic, and there is strong evidence just at present that the acquisition of Cuba is not impossible. Moreover, by the Monroe Doctrine we have assumed as semi-pro- tectorate over the South American states, and as pointed out before, ready communication is a strong bond of union and ami- ty. The building of the Panama Canal will accentuate our responsibility and our opportunity. - Our political ideals have become international, and in consequence we are settling quarrels for European nations. These political conditions are all most strongly conducive to the imperative demand for a larger tonnage of merchant shipping. The political reasons for a merchant marine in the United States apply with even more force to England. On her empire the sun never sets. Islands, peninsulas, and continents form part of her dominions, and a merchant marine is not a matter of choice, but of necessity. Her insularity and over- whelmingly preponderant industrialization make food supplies from abroad imperative. London is the commercial center of 60 the world. England has every reason then to encourage a merchant marine for political purposes. France does not possess so many nor so large colonies as England, but in both these points she ranks ahead of the United States. Still she has not assumed the political responsibil- ity which the United States has assumed under the Monroe Doc- trine. France is ambitious to hold her place with the world powers and so she encourages shipping. She is partly a man- ufacturing nation and must trade her manufactures for raw materials and some food stuffs. Japan as yet has not established many colonies, but her occupation of Korea, and the character of her preparations for aggression or defense is strong evidence that she con- templates assuming a more predominant position in oriental affairs. The insular character of her empire makes coast- wise communication necessary. She is becoming more and more an industrial nation and food stuffs and raw material will probably have to come largely from abroad in the future. Her people are ambitious to make Japan a first rate power, commer- cially as well as politically, and they are turning to a devel- opment of a merchant marine for this purpose. The last factor to consider is the psychological basis for the development of a merchant marine. I can not agree with Professor Johnson that our people feel the call of the briny deep as did our forefathers. He says the same blood courses in the veins of the modern American as coursed in the veins of our forefathers, but I submit that the comforts of the higher 61 standard of living have, so to speak, corrupted that "blood to the extent that the glamour, mingled with the hardships of a seaman's life do not attract our people as a whole so much as other industrial pursuits. The economic influence of a half century of development on land in its effect on the traits of character of the people is not easy to overcome. So psychologically we may say that on the whole it may he bet- ter to wait for some time and see if our people will adapt themselves to a return to the sea. On the other hand the English have always taken to a sea- faring life in the coast districts. There has "been no move- ment away from the sea in England as in the United States. The traditions of seafaring fathers are treasured in the minds of their seafaring sons, who are following the lure of the sea today. The psychological problem is hardest for the French. Their people, with the exception of the inhabitants of Bretaigne and Normandy are not, nor have they ever been a maritime people. Writers have often overlooked this fact, and have ascribed all the evils which have befallen the French merchant marine to subsidy, forgetting that the settled habits and traditions of the people do not fit them for the task. Had Japan been blessed with an earlier start I should say that she has a stronger psychological basis than any other of the nations. Her people are not so hardy, but they are in- tensely interested and sympathetic with anything that will aid the national weal. Her people are adaptive, as their marve- 62 lous rise on the sea shows. If this attitude doesnot change Japan should have a great future. In treating these topics space has forhidden that I should go into great detail, and I may have omitted facts which will appear to some to have "been more important than those included. I have tried to pick out those factors which lume up largest in their hearing on the question. To summarize it may he con- venient to group the nations in their order under each of the headings we have discussed. Geographical Economic Political Psychological United States England England Japan or England United States Japan England Japan Prance United States United States or France Japan France France If this summary is correct we may he better able to ap- preciate our former statement that the experience of France with subsidies is only evidence and not conclusive proof that subsidies cost more than they are worth. How that we are nearing the close of this discussion the reader may realize the hazzard of attempting to draw con- clusions from this mass of complex and conflicting evidence. But on the whole, I think we must agree that we must always say, "other conditions remaining the same", when we discuss the use of subsidies to build up our merchant marine. If the shipbuilding industry is established as advocates of subsidy say it would be,, it will add another large industry to competing industries in Germany, England France and Japan. G3 There must "be an increased commerce to support the influx of new vessels or the shipbuilding industry of these other coun- tries must decline. It does not do to say that we will ship the good3 which now pay $200,000,000 a year freight charges to foreigners, on American ships, for the foreign ship owners will not sit idly "by and see their ships freightless without reducing rates and entering on a war, which a new merchant marine, "build up under the heavy costs of a new industry would be ill able to bear. Protective tariff in this country should have taught us a lesson to be cautious with appeals for infant industries. France has shown us how a bounty may make an industry feeble instead of strong. The people of this country remember the scandals of the promotion of the unsuccessful United States Shipbuilding Company, and when many of these same shipbuilders ask for a restoration of our flag to the seas, the people may justly be suspicious of their motives. After all it may be the wisest course to wait until the law of diminishing returns brings down the profits on capital to the level of profits abroad, and when the demand for ship- ping is strong enough, let American capital undertake the risks and build up our shipping industry naturally. Congress may aid by admitting shipbuilding materials free of duty, but the experience of history is not encouraging on the subject of bounties. America is proud today of her development, of the fact that she stands first in many things, and it may be galling to some of our people to think that other nations surpass us in the shipping of the seas. But we can not be first in everything, and until some more real and vital reason for the rehabilitation of the American merchant marine appears, we should go slowly in the advancement of government aid.